John Stuart Mill and The Limits to Growth

John Stuart Mill's The Principles of Political Economy, like the later books of Alfred Marshall and Paul Samuelson, taught a generation of economists the fundamentals of their subject and was the basis for what might be called a "classical moment" within the field.

Today the book is remembered less for its original theoretical contributions than for its summation of what came before. When cited for its own ideas, it is usually a matter of a libertarian in search of authoritative quotations to back up his position seizing on Mill's argument that

To tax the larger incomes at a higher percentage than the smaller is to lay a tax on industry and economy; to impose a penalty on people for having worked harder and saved more than their neighbours.

However, as people who love to throw around authoritative quotations commonly do, they tend to forget the sentence that immediately follows this: "It is not the fortunes which are earned, but those which are unearned, that it is for the public good to place under limitation"--and that Mill explicitly supported estate taxes as a means of preventing inheritance from creating wide inequalities.

This was far from being the only case where Mill took a position less than congenial to proponents of economic orthodoxy, Mill frequently doing so on matters such as labor laws and the government regulation of industry--and even the idea of the zero-growth economy.1 He discusses exactly this in a chapter (4.3) titled "Stationary state of wealth and population dreaded by some writers, but not in itself undesirable." In it he contended that the stationary state was not only inevitable, but rejected the claim that "the condition of the mass of the people . . . must be pinched and stinted in a stationary condition of wealth" to argue that he is "inclined to believe that it would be, on the whole, a very considerable improvement on our present condition."

His argument seems surprisingly contemporary, and indeed, not dissimilar from what The Limits to Growth had to say--namely that it is "in the backward countries of the world that increased production is still an important object."2 He also contended that

It is scarcely necessary to remark that a stationary condition of capital and population implies no stationary state of human improvement. Even the industrial arts might be as earnestly and as successfully cultivated, with this sole difference, that instead of serving no purpose but the increase of wealth, industrial improvements would produce their legitimate effect, that of abridging labor.

In short, there are goods in life besides the consumption of material product--the "graces of life"--which might be better cultivated in a more leisured, less money-driven society.

Of course, looking back few of us would regard the level of even the wealthiest nations circa 1850 as representing, or even approaching, a satisfactory stopping point. Clearly the possibilities for growth remained vast, expanding by a factor of fifty from his time to the 1980s, per-capita GWP by a factor of fifteen in that same time frame. And certainly it is difficult for us to imagine a universally decent standard of living at the level of Britain at the time (some $4,000 per capita in today's terms, about a tenth of the level the country now enjoys), even were really egalitarian and efficient distribution of the product practicable with the means to hand in that era.

Nonetheless, the fact does not deprive his argument of all its interest or relevance, what he said then perhaps more applicable at a later date. And even if that is not the case, the fact that it appeared in Mills' Principles is a reminder that the idea is not so new or so radical as it is often made to seem--and a reminder, too, of the narrowness of the range of ideas we seem to regard as acceptable within a public debate.

1. Indeed, he went so far as to say in Book 5, Chapter 11, that "Whatever, if left to spontaneous agency, can only be done by joint-stock associations, will often be as well, and sometimes better done, as far as the actual work is concerned, by the state"--a far cry from the claim that the private sector is intrinsically more efficient than the public, which has been at the root of much conservative economic policy in recent years.
2. The authors of Limits were, of course, aware of Mills' writing, and cited him on this point.

Review: The Baroque Arsenal, by Mary Kaldor

New York: Hill & Wang, 1981, pp. 294.

In 1981's The Baroque Arsenal, Mary Kaldor wrote of recent generations of high-tech weapons, like the M-1 main battle tank, the F-111 and Tornado fighters, and the Ohio-class ballistic missile submarine. She also wrote of the institutional arrangements that necessarily go with such weapons--the organization of armed forces around systems like these, and the military-industrial complexes that grow around their development, production and servicing.

Kaldor argued that the phenomenon emerged from the interaction between the conservatism of military establishments, and the dynamism of the industrial enterprises which today meet their needs. Military services, she argued, are prone to stick with established systems and established missions, but business is prone to continually offer the "new and improved" to win new customers, and keep old ones, in a competitive commercial environment.

The resulting pattern was, in Kaldor's view, a problematic one, driving military-industrial complexes to treat the "perfection" of such weapons as an end in itself, and in the process develop them past the point of diminishing returns--gains in performance, and the value of new features, coming at disproportionate cost. The increasingly complex and expensive systems produced in this way tend to be logistical nightmares, at once demanding and unreliable; increasingly vulnerable to newer, cheaper, simpler types of weapon; and irrelevant to the genuine security environment; while crowding other items out of defense budgets--weapons acquisition meaning less money to go around for personnel and training, for instance.

The great historical example of such weaponry is the combination of age-of-sail thinking and Industrial Age hardware in the battleship of the late nineteenth and twentieth centuries. These ships, Kaldor notes, rapidly grew larger, more heavily armed and armored, more complex and more costly, even as their usefulness became increasingly questionable in the era of the torpedo, the submarine, the aircraft--with these ships reaching the apex of technical sophistication and price, and at the same time, practical disutility, during the Second World War.

Kaldor also argued that spending on Baroque weapons not only represents an unwise use of finite defense funds, but has significant macroeconomic implications, because these weapons tend to be the products of "declining" sectors--steel and steam engines already in this state during the battleship's heyday. Government spending on them (which those industries, of course, will encourage) keeps a country overinvested in such sectors at the expense of the newer, "rising" industries that can maximize growth (oil, electricity, chemicals in the late nineteenth and early twentieth centuries), disadvantaging them in the competition for scarce resources like high-quality engineering skills. Making matters worse, a pattern of government support permits the firms in those older fields to remain profitable even while they are losing their edge, letting them avoid modernizations that would otherwise be forced on them by market competition. In short, a preoccupation with such systems is likely to mean a combination of bloated, obsolescent, uncompetitive declining sectors, and underdeveloped rising sectors, reflecting and reinforcing a formerly leading nation's economic decline--as, Kaldor notes, ultimately proved to be the case for Britain.

Looking at the world circa 1980, Kaldor contended that the course Britain followed as Baroque military superpower and declining economic power in the nineteenth and twentieth centuries was being repeated by the United States, and also the Soviet Union. Each remained committed to fielding large forces of increasingly large, sophisticated and costly tanks, aircraft and warships, even as precision-guided munitions made them all increasingly vulnerable--while the associated automotive, aerospace and maritime industries made their economies more reflective of the priorities of the World War II-era than the missile age. Additionally, each appeared economically stagnant in comparison with powers less invested in such forces and technologies (like Japan).

Making matters worse, the prestige of the superpowers, and the eagerness of their industries and governments for export revenues (e.g. lower post-Vietnam defense spending in the U.S. making these a needed substitute for diminished government funding), drove them to export the tendency to developing countries like Brazil and Iran via sales of modern weapons and the associated infrastructure. Those countries then went on to replicate the associated practices at home (like military-industrial complexes of their own), which weighed more heavily on their smaller, weaker and less developed economies, to the cost of international economic development.

Kaldor's argument is an intriguing one, and would seem to have since been validated by the industrial decline of the Soviet Union and the United States through the 1980s, and also by the frustrated developmental path of countries like Brazil, which invested heavily in a defense industry that never delivered anything close to what was hoped for from it. Still, her case is not without its weaknesses, particularly her discussion of the relationship between Baroque weapons and economic decline.

One such error is the mistake of overstressing the conservatism of military acquisitions policies, and in the process overlooking the conservatism of defense contractors. The reality is that defense contractors tend to be large, established businesses prone to prefer "sustaining" innovations to disruptive ones, and which also exercise considerable influence over military preferences through such mechanisms as the lobbying industry, and the revolving door between business and government. It is also a mistake to overlook the extent to which defense needs support rising sectors and new technologies. The battleship did represent yesteryear's technologies (steel, coal, steam, shipbuilding), but newer technologies as well during the years of its decadence (oil, electricity, even analog computing).1

Where the issue of national decline is concerned, it seems worthwhile to note that not only Britain, but its economically more vigorous competitors, the United States and Germany, also went in for large battleship construction programs at the end of the nineteenth century. Of course, the effect of those programs may have been negative in all three of their cases, each country forgoing a measure of growth because of that policy, but clearly it did not suffice to derail the development of Britain's rivals. This indicates that while such policies do play a role in national economic decline, they are only one part of the way in which a high defense burden tends to drag down leading economies--which also tend to be afflicted by other problems (like Britain's reorientation away from production toward finance in those same years).

Likewise, it is worth pointing out that while many countries which had appeared to be on promising development paths in the 1970s ultimately saw their progress collapse, and that a preoccupation with Baroque weapons may well have played into this (as in Brazil's case), the success stories have hardly been exempt from the "Baroque weapon" syndrome--such as South Korea, today the builder of the world's most Baroque tank (the Black Panther).

The end result is that the mentality of the Baroque weapon has been bad for a nation's economic health, for its effective defense planning, and for overall national well-being, but declining powers--and developing powers which fail to develop--are prone to be doing much else wrong. And that makes all the difference between the powers that suffer most from this policy, and their more vigorous competitors, who have generally not been immune to the fascination of the Baroque weapon.

1. In fairness, Kaldor acknowledges that defense spending does prop up new sectors, but leans toward a view that this support is limited rather than foundational--for instance, providing critical markets in the early stages of a product's life--and offers computers as an example. However, in discussing this subject she neglects to mention ENIAC and SAGE (Semi-Automatic Ground Environment), the NLS (oN-Line System) and the ARPANET (the precursor to today's Internet), all military initiatives that seem not only to have provided markets for computing technology, but directly driven important innovations.